Five Ways to Build Innovation Into Your IT Budget

How can you make sure that your IT budget actually supports that forward movement? Gartner’s Top 10 technology trends of 2019 all have one thing in common: they have the potential to completely disrupt your IT operations. When your CEO wants to start implementing them, you have to account for the variables. At the same time, you also can’t stand still. History shows again and again that once companies fail to innovate, they fall behind.

Gartner’s Top 10 Strategic Technology Trends for 2019

The world of technology never stands still. You might be familiar with some of the technologies listed in Gartner’s annual report of innovations, while others are news to you. Studying the list offers significant insight into the need of companies across the spectrum to keep disrupting, innovating and changing things.

Autonomous things, such as robotics, vehicles, and drones.

Augmented analytics through automation and machine learning.

AI-driven development of software and processes.

Digital twins of real-life objects, from IoT devices to entire power plants.

Edge computing in areas from industrial devices to screens to automobile power generators.

Immersive technologies in both consumer and enterprise applications.

Blockchain ledgers in finance, healthcare, manufacturing, and other industries.

Smart spaces that encompass real-life connected environments.

Digital ethics and privacy concerns that ask “are we doing the right thing?”

Quantum computing as a new and potentially exponentially scalable computing model.

Not all of these technologies will be relevant to your business. But chances are that at least some of them are. Blink, and you’ll miss them; “the way we’ve always done things” is no longer a persuasive argument. Innovation is key to stay ahead.

The Dangers of Failing to Innovate

The larger an organization gets, the more conservative its decision-making process becomes. It’s easy to fall into a habit of sticking with the status quo, simply because it’s worked in the past. That’s true even for small businesses who avoid risks to stay within their comfort zone.

The problem with that approach is that perceived safety can lead to actual danger. Staying in place, in the context of competitors moving forward, actually means falling back. Consider how Amazon has disrupted retail, at the expense of two former giants in the industry.

Earlier this summer, Amazon hit $1 trillion in value, second only to Apple in this astronomical valuation. It’s no coincidence that, as Amazon keeps rising, former formidable competitors are dropping like flies.

First, Toys R Us declared Bankruptcy this spring, liquidating the inventory in all 735 of its stores. Sears followed this October, closing hundreds of stores as the 132 year-old chain could no longer compete with online alternatives. Both had crushing levels of debt, and have been fighting declining revenues because of increased online shopping for years. Now, the grim reaper is coming.

Both of their in-store models worked – until it didn’t. Sears and Toys R Us became giants in the retail industry – until they weren’t. While the individual case studies differ on the exact reasons for the decline, one thing is sure: they share a failure to innovate in the face of changing competition and consumer expectations.

That, in a nutshell, sums up the dangers that any company can find itself in. If you don’t keep moving ahead, you are almost necessarily falling back. That’s why it’s so important to build innovation both into your strategic plan and your annual IT budget.

5 Ways to Build Innovation Into Your IT Budget

The truth of innovation is as obvious as funding it can be difficult. Everyone talks a big game, until it is time to pay for it. Even if your organization’s leadership agrees with the need to stay ahead of the curve in general, that does not mean they’ll actually fund initiatives that are actually forward thinking.

Fortunately, you can still make that funding happen. Consider these 5 ways in which you can build innovation into your IT budget to make sure your department and organization keeps driving forward.

1) Split Your Budget into Operating and Improvement Costs.

First, you have to change the budget mindset from costs to benefits. That sounds simple, but might be the most difficult step of the entire process. When looking at a budget, most executives will focus on the bottom line. Your charge is making sure that they instead focus on the positive outcomes of the potential spend.

One option to accomplish that feat is changing your budget into a forecast. Make a clear distinction between operating costs, which are necessary evils to keep the lights on the system running, and improvement costs.

Once the distinction is made, you can begin to look forward. Now, you can build a forecast that shows exactly what would and could happen if new software, approaches, or other innovative budget items receive funding. Support your forecast with data and comparables, to make sure that you can actually justify them during the budget review process.

2) Build a Comprehensive Business Case for Innovation

The first step above can be summarized with a simple statement: you’re changing the emphasis on innovation from costs to benefits. That makes sense for individual initiatives, but can only be sustainably successful if you also build a larger case for innovation. That case goes beyond the budget, but should wrap back into it in a variety of ways.

Your business case for innovation should be general in nature, with specific examples. Allow us to explain what we mean.

You start with a general case for IT innovation in your industry. This can include examples of both successful implementations, and cautious stories about companies who have failed to do so. Then, carry that same narrative down to specific technologies that could lead to that type of innovation. If you’re not sure where to start, Gartner’s technology trends above can help. Finally, carry the same argument all the way through to the individual budget lines related to these initiatives.

3) Consider Piloting Small Initiatives

Even the most strategic approach, following a combination of both the above steps, will run into roadblocks. Regardless of its size, chances are your organization only has a limited annual budget to work with, and cannot fund a major initiative without any indication that it will actually work. For that to happen, you need more than just hypotheticals. You need proof of concept.

One way to get that proof: piloting smaller initiatives that might lead to larger projects down the road. A new technology designed to improve automation across departments could be tested in a single department and monitored closely. Smart spaces that ultimately change the way your physical space is laid out may best be tested with a single space, where you can closely monitor usage and actual process improvements.

Taking this approach also allows you to diversify your innovation efforts. As CIO points out, you’re better off making lots of small bets than one big one. Distributing risks helps you not just minimize sunk costs, but also increase your chances of hitting on the big idea that can ultimately transform your business.

4) Eliminate and Redirect Legacy Budget Lines

It’s difficult to look for waste in IT budgets. Many of the items tend to be related to operating costs, attached to very specific activities that need to happen to keep the system running. Still, finding legacy items that are not actually necessary or could be combined or reduced can play a crucial role in finding money for your innovation budget.

The federal government is a perfect example of legacy systems that impede innovative approaches. One report estimates that about three quarters of its $80 billion IT budget is spent just on legacy systems that could and should be trimmed.

In an ideal scenario, you can eliminate enough waste to add innovation budget lines without increasing the bottom line. In most cases, that will be difficult. But even trimming some legacy items sends a message to decision makers that you are willing to move forward, focus on the future, and don’t subscribe to the ‘we’ve always done it this way’ line of thinking. That alone can send a core message regarding the importance of innovation.

5) Track Your Innovation Successes

Finally, never forget to track your present and past successes. Innovation, done right, tends to pay off. But if you cannot prove that it does, it’s difficult to make an argument why it needs to be included in your IT budget. Even as you build your case for future investments, track the success of past pilots and initiatives and document its details.

Here, you can benefit from the switch to forecasting detailed above. With a forward-facing emphasis, you are making a statement on the potential results of implementation. That, in turn, gives you valuable benchmarks to track as you receive the funding to pilot some of these initiatives.

It won’t all be successful. That’s why you’re chunking out the investment in pilots to begin with. Still, tracking success of the initiatives that actually are paying off can be a powerful argument for more investment in forward-thinking technology in the future.

IT is no longer just a maintenance department. In an age increasingly dependent on technology, it has to be the driver for innovation across the organization. That, in turn, can only be possible with the right funding. For more on how to build innovation into your IT budget, and an introduction to specific applications that can drive that innovation, contact us.